Restoration of Limitation on Downward Attribution of Stock Ownership in Applying Constructive Ownership Rules
Section 70353 · Sec. 70353 ·
What this chapter is about
This part stops a United States person being treated as owning shares held by a foreign person. It then adds a new rule for firms controlled from abroad. Those firms are reached through a parallel set of terms. The changes start with foreign firm tax years after December 31, 2025.
The document says “shall not”Who acts: Secretary of the TreasuryHow: statuteSec. 70353 in the PDF
What the document says
“Subparagraphs (A), (B), and (C) of section 318(a)(3) shall not be applied so as to consider a United States person as owning stock which is owned by a person who is not a United States person.”
The section inserts a new paragraph (4) into section 958(b) of the Internal Revenue Code of 1986 barring subparagraphs (A), (B) and (C) of section 318(a)(3) from being applied so as to treat a United States person as owning stock owned by a person who is not a United States person, and changes the last sentence of section 958(b) to name paragraphs (1) and (4).
What the document actually says
“Subparagraphs (A), (B), and (C) of section 318(a)(3) shall not be applied so as to consider a United States person as owning stock which is owned by a person who is not a United States person.”
That sentence, in plain words
Three parts of an ownership rule are switched off in one case. They may not treat a United States person as owning a foreign person's shares.
What this is about
That kind of treatment is called downward attribution. It pulled foreign firms into United States tax rules. This bar shuts that route.
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The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70353 in the PDF
What the document says
“In the case of any foreign controlled United States shareholder of a foreign controlled foreign corporation--”
The section adds a new section 951B to subpart F of part III of subchapter N of chapter 1 of the Internal Revenue Code of 1986. For a foreign controlled United States shareholder of a foreign controlled foreign corporation, the subpart other than sections 951A, 951(b) and 957 is applied separately and in addition, reading foreign controlled United States shareholder for United States shareholder and foreign controlled foreign corporation for controlled foreign corporation. Section 951A and any other provisions the Secretary names are applied by reading their references to a United States shareholder and to a controlled foreign corporation as including these.
What the document actually says
“In the case of any foreign controlled United States shareholder of a foreign controlled foreign corporation--”
That sentence, in plain words
The rules that follow cover one kind of holder. That holder is based here but run from abroad. It must hold a foreign firm that is also run from abroad.
What this is about
The usual subpart is run twice for such a holder. The second run swaps in the new terms. That brings in firms the bar above shut out.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
“the term `foreign controlled United States shareholder' means, with respect to any foreign corporation, any United States person which would be a United States shareholder with respect to such foreign corporation if--”
The section defines a foreign controlled United States shareholder as any United States person that would be a United States shareholder of the foreign corporation if section 951(b) were read as saying more than 50 percent in place of 10 percent or more, and section 958(b) were read without the new paragraph (4).
What the document actually says
“the term `foreign controlled United States shareholder' means, with respect to any foreign corporation, any United States person which would be a United States shareholder with respect to such foreign corporation if--”
That sentence, in plain words
The term covers a United States person holding a foreign firm. That person must meet the tests that follow.
What this is about
One test raises the holding line to more than half. The other ignores the new bar. So the term reaches only large holders.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “means”Who acts: Congress, Secretary of the TreasuryHow: statuteSec. 70353 in the PDF
What the document says
“the term `foreign controlled foreign corporation' means a foreign corporation, other than a controlled foreign corporation, which would be a controlled foreign corporation if section 957(a) were applied--”
The section defines a foreign controlled foreign corporation as a foreign corporation, other than a controlled foreign corporation, that would be one if section 957(a) were read as naming foreign controlled United States shareholders in place of United States shareholders and section 958(b) other than paragraph (4) in place of section 958(b). The Secretary must issue guidance to carry the section out, including on treating these persons and corporations as United States shareholders and controlled foreign corporations for other purposes of the title, and on foreign controlled foreign corporations that are passive foreign investment companies.
What the document actually says
“the term `foreign controlled foreign corporation' means a foreign corporation, other than a controlled foreign corporation, which would be a controlled foreign corporation if section 957(a) were applied--”
That sentence, in plain words
The term covers a foreign firm that is not already a controlled foreign firm. It must meet the tests that follow.
What this is about
The tests swap in the new shareholder term. They also ignore the new bar. The Secretary must write rules to make it work.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall apply”Who acts: Secretary of the TreasuryHow: statuteSec. 70353 in the PDF
What the document says
“The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2025.”
The section applies its amendments to taxable years of foreign corporations beginning after December 31, 2025. Except as the Secretary provides, the effective date of any amendment to the Internal Revenue Code of 1986 is applied by reading references to United States shareholders and controlled foreign corporations as including the new terms. The amendments are not to be read as creating any inference about how the Code applied to earlier years.
What the document actually says
“The amendments made by this section shall apply to taxable years of foreign corporations beginning after December 31, 2025.”
That sentence, in plain words
The changes start with foreign firm tax years that begin after December 31, 2025. Older years are left out.
What this is about
Earlier tax years are not touched. The law says no view is taken on them. The new terms are read into other effective date rules.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
Each distinct thing the section does: bar downward attribution from a foreign person, create the new section on foreign controlled United States shareholders, define a foreign controlled United States shareholder and a foreign controlled foreign corporation, require the Secretary to issue guidance, and fix the effective date with the special rule and the no inference provision.
The clerical amendment adding an item to a table of sections.
The section works by amending section 958(b) and adding a section to subpart F of the Internal Revenue Code of 1986, and points to sections 318, 951, 951A, 957 and 1297, none of which is indexed here.
